A mall operator has the opportunity to lease an additional 20,000 square feet of space for the next five years. It can divide up this space between the following potential new tenants. Each tenant will require a different amount of space, and each opportunity represents a different level of NPV, as indicated. The discount rate is 10% for all options. The mall operator's objective is to maximize NPV.

Store	NPV	Space Required (Sq. Feet)
Pet Store	$600,000	6,000
Fabric Store	$1,000,000	7,000
Book Store	$320,000	4,000
Luggage Store	$600,000	5,000
Hardware Store	$900,000	6,000
Watch Store	$310,000	2,000
Shoe Repair Store	$30,000	1,000

Question A: (5 points) Assuming the amount of additional space available for lease is limited to 20,000 square feet, which of the above projects should the mall operator accept FIRST? In other words, which of the above projects is MOST attractive?

A.

Luggage Store

B.

Shoe Repair Store

C.

Hardware Store

D.

Watch Store

E.

Pet Store

Question B: (5 points) What is the TOTAL NPV created if the mall operator chooses the optimal combination of stores for its expansion?

A.

$2,810,000

B.

$2,210,000

C.

$3,760,000

D.

$3,130,000

E.

$1,000,000